Bulls And Bears

Bleak earnings, trade tensions weigh on STI

Biggest losers include financial heavyweights and most tech firms

Disappointing corporate earnings and renewed trade tensions left investors on edge from the word go yesterday.

The benchmark Straits Times Index (STI) opened in the red and remained depressed throughout the day, shedding 11.81 points, or 0.37 per cent, to 3,187.69.

Losers outnumbered gainers 241 to 135 after 1.72 billion shares worth $1.15 billion changed hands.

Financial heavyweights did the STI no favours: United Overseas Bank shed 1.16 per cent to $25.53; OCBC Bank declined 1.04 per cent to $11.40; and Great Eastern sank 1.05 per cent to $26.42.

Most local technology stocks were swayed by lacklustre earnings from their United States counterparts and also pointed lower.

AEM Holdings lost 0.55 per cent to 90.5 cents while Creative Technology, buoyed earlier this month by hype over the Las Vegas launch of its Super X-Fi headphones, gave up gains too, declining 0.92 per cent to $5.38.

Meanwhile, Venture Corp fell as much as 1.3 per cent during the day, but regained its footing later to end trading up 0.25 per cent at $15.93.

Maybank Kim Eng said earlier this month that Venture was the safest bet amid volatility in the tech sector. Analyst Lai Gene Lih noted that its fundamentals remain intact with the company being a potential beneficiary of the US-China trade war, given its sizeable production out of Singapore and Malaysia.

The disappointment came as US giants Caterpillar and Nvidia issued bleak earnings guidance on Monday. Both blamed deteriorating demand from China as the main reason for their earnings downgrade.

Caterpillar, considered a bellwether for global trade, given its exposure to overseas markets, cited lower demand in China for sales declines in the Asia-Pacific.

Likewise, chipmaker Nvidia said "deteriorating macroeconomic conditions, particularly in China", impacted demand for its graphics processing units.

"When you see the big cyclical companies missing earnings... it worries the market because it confirms what they have already been hearing from the macro side," said Mr Dave Lafferty, chief market strategist at Natixis Investment Managers. "Everyone knows the world is decelerating, they are just waiting to see if the corporate earnings confirm that."

Mr Eli Lee, head of investment strategy at Bank of Singapore, is also seeing downgrades to consensus earnings growth expectations pick up speed across major regions, as trade uncertainties and tighter financial conditions continue to weigh on economic growth.

A version of this article appeared in the print edition of The Straits Times on January 30, 2019, with the headline 'Bleak earnings, trade tensions weigh on STI'. Subscribe